BK12e Ch11 Basic
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Transcript of BK12e Ch11 Basic
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Copyright 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Part 4: Product DecisionsPart 4: Product Decisions
1.1. Product and ServiceProduct and ServiceStrategiesStrategies
2.2. Category and BrandCategory and Brand
Management, ProductManagement, ProductIdentification, and New-Identification, and New-
Product DevelopmentProduct Development
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Copyright 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Chapter 11Chapter 11
Product andProduct and
Service StrategiesService Strategies
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11-3Copyright 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Chapter ObjectivesChapter Objectives
Define the termproductand distinguish between goods andservices and how they relate to the goods-services
continuum. Explain the importance of the service sector in todays
marketplace.
List the classifications of consumer goods and services and
briefly describe each category. Describe each of the types of business goods and services.
Explain how quality is used by marketers as a productstrategy.
Explain why firms develop lines of related products.
Describe the way marketers typically measure product mixesand make product mix decisions.
Explain the concept of the product life cycle and identify thedifferent stages.
Describe how a firm can extend a products life cycle.
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11-4Copyright 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
What is a Product?What is a Product?
Product:Product: bundle of physical, service, and
symbolic attributes designed to enhance
buyers want satisfaction
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11-5Copyright 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
What are Goods and Services?What are Goods and Services?
Service:Service: intangible task that satisfies
consumer or business user needs
Goods-services continuum:Goods-services continuum: device that
helps marketers to visualize the differences and
similarities between goods and services
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11-6Copyright 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Characteristics that distinguish services from
goods:Intangibility
Inseparability
PerishabilityDifficulty of standardization
Frequent requirement of
interaction between buyer
and Seller
Variability
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Importance of the Service SectorImportance of the Service Sector
The service sector makes up more than two-thirds of the economy.
Services also play a crucial role in theinternational competitiveness of U.S. firms.
Concerns include offshoring service jobs such
as customer service call centers.
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Classifying Goods and Services forClassifying Goods and Services for
Consumer and Business MarketsConsumer and Business Markets
Consumer productsConsumer products: products destined for
use by ultimate consumers
Business (or B2B) productsBusiness (or B2B) products: those that
contribute directly or indirectly to the output of
other products for resale
Also called industrial or organizationalproducts
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Types of Consumer ProductsTypes of Consumer Products
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Convenience productConvenience product: good or service that
consumers want to purchase frequently,immediately, and with minimal effort
Impulse goods and services are
purchased on the spur of the moment.
Staples are convenience goods and
services that consumers constantly replenish
to maintain a ready inventory.
Emergency goods and services are boughtin response to unexpected and urgent needs.
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Shopping productShopping product: good or service
purchased only after the customer compares
competing offerings from competing vendorson such characteristics as price, quality, style,
and color
Typically cost more than conveniencepurchases.
Include tangible items.
Shopper lacks complete information and
gathers information during the buying
process.
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Specialty productSpecialty product: good or service with
unique characteristics that cause the buyer tovalue it and make a special effort to obtain it
Unsought productUnsought product: good or servicemarketed to consumers who may not yet
recognized in the need for it
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Types of Business Products
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InstallationInstallation: major capital investment by abusiness buyer that typically involves expensive
and relatively long-lived products, such as anew factory or piece of heavy machinery
Accessory equipmentAccessory equipment: capital product, usually
less expensive and shorter-lived that insulation,such as a laptop computer
Component parts and materialsComponent parts and materials: finished
business products that become parts of buyingfirms final products, such as spark plugs fornew cars
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Raw materialsRaw materials: business product, such as afarm product (wheat, cotton, soybeans) ornatural product (coal, lumber, iron ore) thatbecome part of a final product
SuppliesSupplies: products that represent regular
expenses necessary to carry out a firms dailyoperations but are not part of the final product.Supplies are sometimes called MRO items
MRO itemMRO item: part of business supplies
categorized as maintenance items, repairitems, or operating supplies such as lightbulbs, nuts and bolts used in repairingequipment, or pencils
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Business servicesBusiness services: intangible product
purchased to facilitate a firms production
and operating processes such as financial
services, leasing of vehicles, legal advice
and consulting
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Quality as a Product StrategyQuality as a Product Strategy
QualityQuality is a key component to a firms success
in a competitive marketplace.
Total quality managementTotal quality management (TQM): approach
that involves all employees in continuallyimproving products and work processes to
achieve customer satisfaction and world-class
performance
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Worldwide Quality ProgramsWorldwide Quality Programs
Malcolm Baldrige National Quality Award
ISO 9002: set of standards for qualitymanagement and quality assurancedeveloped by the International StandardsOrganization in Switzerland for countries in
the European Union
Benchmarking:Benchmarking: process in which anorganization improves performance bycontinually comparing and measuring itselfagainst the leading firms in an industry andimplementing changes for qualityimprovement
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Quality of ServicesQuality of Services
Service encounter
Service quality: Expected and perceived
quality of a service offering
Determined by five variables:
Tangibles
Reliability
Responsiveness
Assurances
Empathy
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Development of Product LinesDevelopment of Product Lines
Product LineProduct Line: a series of related productsMotivation
Desire to Grow
Enhancing the Companys Position inthe Market
Optimal Use of Company Resources
Exploit the Product Life Cycle
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A companys assortment of product lines and
individual offeringsProduct Width--the number of product lines
offered.
Product Length--the number of different
products a firm sells.
Product Depth--variations in each product that
a firm markets in its mix.
The Product MixThe Product Mix
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11-22Copyright 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Product Mix DecisionsProduct Mix Decisions
A firm may lengthen or widen its productmix
A Company may decide to add variations
that will attract new users
A product may be pruned or altered, andnew product may extend the product life
cycle
Line extension: introduction of a newproduct that is closely related to other
products in the firms existing line
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11-23Copyright 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
The Product Life CycleThe Product Life Cycle
Product life cycleProduct life cycle: progression of products
through introduction, growth, maturity, anddecline stages
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11-24Copyright 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Introduction StageIntroduction Stage
Firm works to stimulate demand for the
new market entry
Promotional campaigns stress features
Additional promotions to intermediariesattempt to induce them to carry the product
Although prices are typically high, financial
losses are common due to heavypromotional and research-and-
development costs
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11-26Copyright 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Maturity StageMaturity Stage
Industry sales continue to grow, buteventually reach a plateau
Many competitors have entered themarket, and profits began to decline
Differences between competing productsdiminish
Available supplies exceed industry demandfor the first time
Competition intensifies and heavypromotional outlays are common
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11-27Copyright 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Decline StageDecline Stage
Innovations or shifts in consumer
preferences cause an absolute decline in
industry sales
Industry profits fall -- sometimes becomelosses
Firms cut prices in a bid for the dwindling
market
Manufacturers gradually drop the declining
items from their product lines
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11-28Copyright 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Extending the Product Life CycleExtending the Product Life Cycle
Marketers usually try to expand each stage of thelife cycle for their products as long as possible
Product life cycles can stretch indefinitely as a
result of decisions designed to:
Increase the frequency of use by currentcustomers
Increase the number of users for the
productFind new uses
Change package sizes, labels, or product
quality
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Product Deletion DecisionsProduct Deletion Decisions
Product lines must sometimes be pruned andmarginal products eliminated
This decision is typically faced during the late
maturity and early declined stages of the
product life cycleAn unprofitable item may be continued in
order to provide a complete line for
customers